FT opinion article: “Let the Fed put money where it is really needed”. She means CBDC. The problem is that the Fed now needs to take money away, not add to it. This is not going to end well. Thread #Fed #monetary policy #markets #bonds #equities ft.com/content/0c8636…
1/The author argues that the Fed has overreached its mission. It has fuelled a shadow banking system and an asset bubble and will now have to create a recession in order to control inflation.
2/And politicians have been happy to outsource the decisions because they can then claim they are not to blame. The Fed is being asked to do stuff it is not qualified to do (same as the Supreme Court).
3/One idea would be for individuals to hold Fed accounts. The central bank could then funnel money to the places where it is needed.
4/IMHO I agree with everything until point 3. She is talking about a CBDC arrangement. This is 20/20 vision. It might be a good idea for the next crisis (although the central banks are really bad at identifying where money is needed).
5/But what we are talking about now is taking money away, not adding to it (if we want to control inflation). So, are we going to allow the central bank to take money away from your account? Please sign up for this.

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More from @jacobotweetsnow

May 23
FT opinion article: “How shadow banks threaten the global economy”. The Fed seems to think the financial world is separate from the economy. See how that works out. Thread #markets #equities #bonds ft.com/content/d22ec3…
1/The author points out that the next crisis will arise from shadow banking “institutions”. Especially those that lend to corporates. They have a lot of debt, especially in the US, and the cost is set to rise.
2/Private markets are taking over from public ones, with investors seeking yield. “Swing a stick in Manhattan and you’re bound to hit someone involved in private lending”. Debt is now much higher.
Read 5 tweets
May 17
FT opinion article: “The dollar’s rapid rise increases risks for global economy - Dangers are particularly acute for developing countries already facing number of crises”. Our currency, but your problem #dollar #Fed #markets #bonds #equities ft.com/content/099cf5…
1/According to the author the recent rise in the dollar has attracted less attention than it should. In theory it should help exports by weaker countries and ease US inflation.
2/This year the dollar is strongly up due to expectations of more aggressive Fed monetary policy, economic outperformance and safe haven status.
Read 8 tweets
Apr 21
Bloomberg opinion article: “Big U.S. Banks Get a Little Taste of the ‘Doom Loop’ - Deepening bond losses cut into capital ratios, which put cash payouts to investors at risk.” Not only payouts. Thread #equities #bonds #banks bloomberg.com/opinion/articl…
1/According to the author US banks are getting a little taste of the European style bond doom-loop. When bond prices fall owners have to mark them to market which for a bank eats into their capital base.
2/In weak European countries this led to the fear that the banks would have to be bailed out, leading to strains in government finances, increasing risk and pushing bond prices further down. A vicious circle that still haunts Europe.
Read 8 tweets
Apr 19
FT opinion article: “Central bankers should think twice before pressing the brake even harder - The war against Ukraine has brought a new negative supply shock on top of the old one”. Harder? Thread #bonds #equities #centralbanks #monetarypolicy ft.com/content/41c248…
1/According to the author the invasion of Ukraine has silenced the debate about “transitory” inflation. But where central banks stood impacts how they react. Initially the idea was that inflation was the result of supply issues that could be ignored. This view lost out.
2/Central banks made hawkish turns and have painted themselves into a corner, as the Ukraine crisis has brought a new supply shock. Central banks committed to tightening when the second shock made things worse.
Read 11 tweets

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